North American stock markets are set to open sharply higher, as investors bet that recent worries that the U.S. Federal Reserve will soon taper bond purchases prompted a premature pullback in equity values.
The two-day FOMC meeting will wrap up on Wednesday with a news conference from Chairman Ben Bernanke, in what will likely be the most important market event of the week. Mr Bernanke may very well continue to caution that he'll ease back on the unprecedented bond-buying program at some point. But the conditions he places on it will be key - and he'll likely emphasize that it'll be contingent on how future economic data come in. That should mean the tapering of bond purchases is not imminent.
The backdrop overall this morning is constructive for equities. The Japanese yen softened overnight, allowing the ultra-volatile Nikkei of late to rally, and most other overseas markets have put in a strong performance today - at least so far. The 10-year U.S. Treasury bond yield continues to drift lower, quoted at about 2.13 per cent this morning - well off last week's high of 2.27 per cent. Higher rates at the longer end of the yield curve have been hindering the performance of income-producing securities such as REITs and preferred shares in recent days - but for now the pressure is lifting.
In commodities this morning, crude oil has edged up to another nine-month high amid speculation that the unrest in Syria may spread to other parts of the Middle East and threaten supplies. Reports this morning suggest U.S. President Barack Obama will soon authorize arming Syrian rebel groups.
Now, here's a closer look at what's going on this morning and what's to come.
Futures: S&P 500 +0.8 per cent; Dow +0.7 per cent; Nasdaq +0.9 per cent
Hong Kong's Hang Seng +1.22 per cent
Shanghai composite index -0.28 per cent
Japan's Nikkei +2.73 per cent
London’s FTSE 100 +0.66 per cent
Germany’s DAX +1.26 per cent
France's CAC 40 +1.49 per cent
WTI crude oil (Nymex July) +0.63 per cent at $98.47 (U.S.) a barrel
Gold (Comex Aug) -0.38 per cent at $1,382.30 (U.S.) an ounce
Copper (Comex July) -0.14 per cent at $3.20 (U.S.) a pound
Canadian dollar down 0.0003, or 0.03 per cent, at $0.9843 (U.S.)
U.S. 10-year Treasury yield 2.13 per cent, down 0.05
Canada 10-year government bond yield 2.12 per cent, down 0.02
ECONOMIC INDICATORS TO WATCH:
The New York Empire State manufacturing index came in at 7.84 in June, rebounding from -1.43 in May. A flat reading had been forecast by economists.
The number of existing homes that changed hands in Canada last month is 2.6 per cent lower last May.
(10 a.m. ET) The U.S. National Association of Home Builders reports on the housing market index.
STOCKS TO WATCH:
Brookfield Asset Management Inc. said it is selling its Longview forestry assets in the U.S. Pacific Northwest through deals totalling nearly $3.7-billion (U.S.).
THIS MORNING'S TOP INVESTING READS ON THE WEB:
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Legendary investor Jim Rogers shares his latest outlook on the bond "bubble," gold, agriculture and much more.
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The premarket report is constantly updated to reflect the latest news developments and market moves. For instant headlines on breaking economic and corporate news in the premarket, follow Darcy Keith on Twitter at @eyeonequities.